Free Samples and Gifts: - As Per sec 7 (1) (a) Supply includes all forms of Supply of Goods or Service or both as Sale, Transfer, Barter, Exchange, License, Rental, Lease or Disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. However, as per Schedule I of CGST Act 2017 following Activities to be treated as Supply even made without Consideration: -
• Permanent transfer or disposal of business assets where Input Tax Credit has been availed on such assets.
• Supply of Goods or Service or both between related persons or distinct person as specified in Sec 25, made in the course or furtherance of Business. Provided Gift by Employer to Employer value not exceeding Rs. 50000 in a financial year shall not be treated as Supply of Goods or Service or both.
• Supply of Goods by a Principal to his agent where the agent undertakes to supply such Goods on the behalf the Principal or Supply of Goods by an Agent to his Principal where the agent undertakes to receive such Goods on behalf of the Principal.
• Import of Service by a Taxable Person from a Related Person or from any of his other establishments outside India, in the Course or Furtherance of Business.
Therefore Sample which are supplied free of Cost (Without Consideration) does not qualify as Supply except Activities Covered under Schedule I of CGST Act 2017.
As Per Sec 17(5) (h) of CGST Act 2017 Input Tax Credit (ITC) shall not be available in respect of Goods, Lost, Stolen, Destroyed, Written off or disposed of by way of Free Gifts or Free Samples etc. Thus, no Input Tax Credit (ITC) is not available to Supplier on Inputs, Input Service and Capital Goods to the extend they are used in relation to Free Gifts or Free Sample distributed without any consideration. However, where Activity of Supply of Gifts or Free Sample treated as Supply on account of Provisions contained in Schedule I of CGST Act 2017, supplier would be eligible to avail Input Tax Credit (ITC).
Buy one get one free: - Where Goods supplied under Offer as ‘Buy One, Get One Free’ or under other similar offer than such Supply will be treated as Composite or Mixed Supply under Sec 8 of CSGT Act 2017, therefore it will be treated as Supply of Two Goods for the Price of one. Taxability of such Supply will depend upon type of Supply (i.e. Composite Supply or Mixed Supply). Input Tax Credit (ITC) shall be available to the Supplier for Inputs, Input Service and Capital Goods used in relation to Supply of Goods or Service or both as part of such Offer.
As Per Sec 8 of CGST Act 2017 -
Composite Supply means Supply consisting of two or more supplies of Goods or Service or Both, which are Naturally Bundled and supplied in conjunction with each other in ordinary course of Business, one of which is a Principal Supply. Tax Liability shall be at the rate of Principal Supply. Example: - Charger Supplied with Mobile Phone.
Mixed Supply means Supply consisting of two or more supplies of Goods or Service or Both which are not naturally bundled and can be supplied independently but still supplied together. In other words, Mixed Supply means Supply consisting of two or more supplies of Goods or Service or Both made in conjunction with each other by a Taxable Person for a single Price where such supply does not constitute a Composite Supply.
Discounts including ‘Buy more, save more’ offer: - Where Supplier offers like Buy two or Get 20% off, 30% Discount on Purchase of RS.10000 or more and Get 1% Additional Discount on Purchase of 20000 Quantity or more in a year, in such case Discount offered by supplies to customers including staggered discount under such schemes shall be excluded from the Value of Supply determined under sec 15(3) of CGST Act 2017, including the reversal of Input Tax Credit (ITC) by the recipient of Supply attributable to Discount on the basis of documents(s) issued by the Supplier. Supplier shall be entitled to avail the Input Tax Credit (ITC) for such Inputs, Input Services and Capital Goods used in relation to Supply of Goods or Service or both on such Discount.
Secondary Discount:- As Per Sec 34(1) of CGST Act 2017, where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or here the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.
As per clarification vide Circular No. 92/11/2019-GST Financial/Commercial Credit Note can be issued by Supplier even if the conditions of Sec 15(3)(b) of CGST Act 2017 are not satisfied (i.e. credit note(s) can be issued as a commercial transaction between the two contracting parties). Value of Supply shall not include any discount by way of issuance of Credit Note(s) as Secondary Discount or by any other means except in cases where provisions of Sec 15(3) (b) of CGST Act 2017 are satisfied. However, there will be no Impact on Availability of Input Tax Credit (ITC) in the Hands of Supplier in case of Secondary Discount, i.e. Supplier shall be entitled to avail the Input Tax Credit (ITC) for such Inputs, Input Services and Capital Goods used in relation to Supply of Goods or Service or both on such Discount.
• Permanent transfer or disposal of business assets where Input Tax Credit has been availed on such assets.
• Supply of Goods or Service or both between related persons or distinct person as specified in Sec 25, made in the course or furtherance of Business. Provided Gift by Employer to Employer value not exceeding Rs. 50000 in a financial year shall not be treated as Supply of Goods or Service or both.
• Supply of Goods by a Principal to his agent where the agent undertakes to supply such Goods on the behalf the Principal or Supply of Goods by an Agent to his Principal where the agent undertakes to receive such Goods on behalf of the Principal.
• Import of Service by a Taxable Person from a Related Person or from any of his other establishments outside India, in the Course or Furtherance of Business.
Therefore Sample which are supplied free of Cost (Without Consideration) does not qualify as Supply except Activities Covered under Schedule I of CGST Act 2017.
As Per Sec 17(5) (h) of CGST Act 2017 Input Tax Credit (ITC) shall not be available in respect of Goods, Lost, Stolen, Destroyed, Written off or disposed of by way of Free Gifts or Free Samples etc. Thus, no Input Tax Credit (ITC) is not available to Supplier on Inputs, Input Service and Capital Goods to the extend they are used in relation to Free Gifts or Free Sample distributed without any consideration. However, where Activity of Supply of Gifts or Free Sample treated as Supply on account of Provisions contained in Schedule I of CGST Act 2017, supplier would be eligible to avail Input Tax Credit (ITC).
Buy one get one free: - Where Goods supplied under Offer as ‘Buy One, Get One Free’ or under other similar offer than such Supply will be treated as Composite or Mixed Supply under Sec 8 of CSGT Act 2017, therefore it will be treated as Supply of Two Goods for the Price of one. Taxability of such Supply will depend upon type of Supply (i.e. Composite Supply or Mixed Supply). Input Tax Credit (ITC) shall be available to the Supplier for Inputs, Input Service and Capital Goods used in relation to Supply of Goods or Service or both as part of such Offer.
As Per Sec 8 of CGST Act 2017 -
Composite Supply means Supply consisting of two or more supplies of Goods or Service or Both, which are Naturally Bundled and supplied in conjunction with each other in ordinary course of Business, one of which is a Principal Supply. Tax Liability shall be at the rate of Principal Supply. Example: - Charger Supplied with Mobile Phone.
Mixed Supply means Supply consisting of two or more supplies of Goods or Service or Both which are not naturally bundled and can be supplied independently but still supplied together. In other words, Mixed Supply means Supply consisting of two or more supplies of Goods or Service or Both made in conjunction with each other by a Taxable Person for a single Price where such supply does not constitute a Composite Supply.
Discounts including ‘Buy more, save more’ offer: - Where Supplier offers like Buy two or Get 20% off, 30% Discount on Purchase of RS.10000 or more and Get 1% Additional Discount on Purchase of 20000 Quantity or more in a year, in such case Discount offered by supplies to customers including staggered discount under such schemes shall be excluded from the Value of Supply determined under sec 15(3) of CGST Act 2017, including the reversal of Input Tax Credit (ITC) by the recipient of Supply attributable to Discount on the basis of documents(s) issued by the Supplier. Supplier shall be entitled to avail the Input Tax Credit (ITC) for such Inputs, Input Services and Capital Goods used in relation to Supply of Goods or Service or both on such Discount.
Secondary Discount:- As Per Sec 34(1) of CGST Act 2017, where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or here the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.
As per clarification vide Circular No. 92/11/2019-GST Financial/Commercial Credit Note can be issued by Supplier even if the conditions of Sec 15(3)(b) of CGST Act 2017 are not satisfied (i.e. credit note(s) can be issued as a commercial transaction between the two contracting parties). Value of Supply shall not include any discount by way of issuance of Credit Note(s) as Secondary Discount or by any other means except in cases where provisions of Sec 15(3) (b) of CGST Act 2017 are satisfied. However, there will be no Impact on Availability of Input Tax Credit (ITC) in the Hands of Supplier in case of Secondary Discount, i.e. Supplier shall be entitled to avail the Input Tax Credit (ITC) for such Inputs, Input Services and Capital Goods used in relation to Supply of Goods or Service or both on such Discount.
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